In the first half of 2025, the growth in energy storage and new energy vehicles maintained rapid expansion in lithium battery shipments. Industry leader CATL (300750) delivered impressive performance with improved gross margins and capacity utilization rates. However, smaller player Eve Energy Co.,Ltd. (300014) was not as fortunate.

During the first half of 2025, Eve Energy achieved revenue growth exceeding 30%, but experienced a decline in net profit attributable to shareholders. Excluding the impact of equity incentives and specific bad debt provisions, adjusted net profit grew only 3.78%, continuing the trend of the past three years where revenue growth outpaced profit growth. Notably, the company's asset-liability ratio reached its highest level since Q3 2022, making the company's Hong Kong IPO more urgent. In late May 2025, the company submitted its Hong Kong IPO application, planning to raise funds for power battery expansion projects in Hungary and Malaysia.

However, analysis reveals that over the past four years, Eve Energy's power and energy storage battery capacity utilization rates have declined significantly year-over-year. The company's future capacity expansion will approximately double existing capacity, which will further exacerbate overcapacity risks and expose the company's performance to industry-wide overcapacity pressures.

**Revenue Growth Without Profit Growth**

Eve Energy's main business involves lithium battery production and sales. The company started in the consumer battery sector and has expanded into power batteries and energy storage batteries in recent years, forming a three-category battery portfolio. Power batteries and energy storage batteries have since overtaken the original business, with each segment reaching over 19 billion yuan in scale by 2024.

Since listing on the Shenzhen Stock Exchange in 2009, Eve Energy has demonstrated high growth in both revenue and profitability. According to the prospectus, from listing through the end of 2024, Eve Energy's revenue compound annual growth rate was 43.9%, with net profit growth at 36%.

However, in recent years, the company has faced increasingly intense competition, with both sales and profit growth significantly slowing compared to earlier periods. From 2022-2024, Eve Energy's revenue was 36.304 billion yuan, 48.784 billion yuan, and 48.615 billion yuan respectively. Profit attributable to shareholders was 3.509 billion yuan, 4.05 billion yuan, and 4.076 billion yuan respectively, representing a revenue compound annual growth rate of approximately 15% and profit compound annual growth rate of about 8%, with revenue growth far exceeding profit growth.

This trend continued in the first half of 2025. During the reporting period, the company's revenue and net profit were 28.17 billion yuan and 1.605 billion yuan respectively, representing increases of 30.06% and a decrease of 24.9%. Excluding the impact of equity incentives and specific bad debt provisions, the company's adjusted net profit for the first half was 2.218 billion yuan, up 3.78% year-over-year, with accelerated revenue growth but nearly stagnant adjusted net profit growth.

As the company's customers are primarily automotive OEMs and energy storage plant operators, and the company faces competition from major players like CATL and BYD (002594) in these sectors, the company recorded relatively low gross margins for both energy storage and power batteries.

During the reporting period, the company's power battery gross profits were 2.734 billion yuan, 3.257 billion yuan, and 2.723 billion yuan, with gross margins of 15%, 13.6%, and 14.2% respectively. Energy storage battery gross profits were 845 million yuan, 2.781 billion yuan, and 2.801 billion yuan, with gross margins of 9%, 17%, and 14.7% respectively.

Benefiting from declining lithium carbonate prices, the company's product prices also decreased. From 2022-2024, Eve Energy's average consumer battery prices were 6.9 yuan, 5.7 yuan, and 5 yuan per unit. Power battery prices per GWh were 110 million yuan, 90 million yuan, and 60 million yuan respectively. Energy storage battery prices per GWh were 80 million yuan, 60 million yuan, and 40 million yuan respectively.

**Significant Decline in Capacity Utilization**

Although consumer batteries were the founding business, Eve Energy was one of the earlier listed companies to transition toward power and energy storage batteries. For this purpose, the company has conducted intensive refinancing since 2019.

In February 2019, Eve Energy raised 2.467 billion yuan net through private placement for capacity expansion. In October 2020, it raised approximately 2.48 billion yuan net from seven independent third parties for power battery R&D and mass production, working capital supplementation, and other projects. In October 2022, the company raised 8.97 billion yuan net from controlling shareholders and related parties for passenger vehicle power battery projects and working capital supplementation. In March 2025, the company raised 4.971 billion yuan net through convertible bonds, primarily for lithium iron phosphate energy storage power battery and passenger vehicle power battery projects.

For the current H-share fundraising plan, the company stated it will be used for projects in Hungary, Malaysia, and other locations.

This is still insufficient, as the company's interest-bearing debt is also increasing. As of the end of June 2025, Eve Energy had short-term borrowings of 753 million yuan, interest-bearing liabilities due within one year of 5.335 billion yuan, long-term borrowings of 20.267 billion yuan, and bonds payable of 5.143 billion yuan (mainly convertible bonds), totaling 31.498 billion yuan in interest-bearing debt, at relatively high levels in recent years.

Despite maintaining substantial profits over the past few years, Eve Energy's asset-liability ratio has remained at relatively high levels of 60.35%, 59.72%, and 59.36% respectively, climbing to 62.57% by the end of the first half of 2025, significantly higher than in 2020 and 2021.

Furthermore, Eve Energy continues to increasingly utilize downstream supplier financing. From 2022 to the first half of 2025, the sum of accounts payable and notes payable was 25.286 billion yuan, 30.186 billion yuan, 28.921 billion yuan, and 31.311 billion yuan respectively, with notes payable declining yearly while accounts payable reaching new highs each year. The turnover days for accounts payable (including notes payable) were 218.67 days, 246.7 days, 264.99 days, and 232.77 days respectively, meaning suppliers receive full payment only after supplying goods for most of a year.

This is primarily due to expansion in power batteries and energy storage batteries. According to the convertible bond prospectus, Eve Energy has numerous ongoing and planned construction projects. Based on capacity calculations at the end of 2023, existing capacity was 84 GWh, with projects expected to come online by 2025 releasing 126 GWh of capacity. The sum of existing and new capacity will reach 210 GWh, representing approximately a 2-fold expansion within 2 years. By 2027, the sum of existing and new capacity is expected to reach 328 GWh, representing approximately a 3-fold expansion within 4 years.

As of the end of 2024, Eve Energy's power and energy storage battery capacity reached 112.9 GWh, meaning the company still has nearly 2 times the capacity under construction or planned for construction.

Expansion has led to high construction in progress. As of the end of 2024, the company's construction in progress balance was 9.308 billion yuan, further climbing to 12.265 billion yuan in the first half of this year. As projects advance, they will consume more capital expenditure. Particularly, the company's overseas projects have a budget of 15.338 billion yuan, with current construction progress at only 19.12%, meaning much more capital investment will be required in the future.

In fact, even before this, Eve Energy's capacity utilization rates have been declining year-over-year. According to the convertible bond prospectus and Hong Kong IPO prospectus, in 2021, 2022, and 2023, the company's power and energy storage lithium-ion battery capacity utilization rates were 96.14%, 92.82%, and 72.9% respectively. By the end of 2024, the power and energy storage battery capacity utilization rate further declined to 69.2%, reaching a four-year low.